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That will mean, one way or another: Lots of money printing, a falling EUR and thus likely a rising USD

even the government’s own report shows that Canadian imports (of both goods and services) from the EU will increase by twice as much as Canadian exports to the EU, substantially widening the existing bilateral trade deficit.

exports grew less rapidly with FTA partners than with non-FTA partners, but imports grew quicker with FTA partners than with non-FTA partners. 

In the real world, free trade agreements (not surprisingly) tend to make existing trade imbalances even worse: this is true throughout economics, where deregulation generally tends to exacerbate the imbalances and unevenness of market outcomes.

Three scenarios are presented: one in which tariffs are mutually eliminated; one in which EU-Canada trade expands in line with the historical experience of Canada’s previous FTAs; and one in which tariff elimination is combined with the appreciation of Canada’s currency (versus the euro) which has been experienced in fact since the two parties launched free trade negotiations.  In every case, the bilateral trade balance worsens significantly (and in the third scenario, it worsens dramatically – since the higher Canadian dollar reduces Canadian exports, even as imports from the EU are surging).  Based on average employment intensity across 23 goods-producing industries, the simulations suggest an incremental loss of between 28,000 jobs (in the first scenario) and 150,000 jobs (in the third).  Direct losses in Canadian GDP range between 0.56 percent in the first scenario, and almost 3 percent in the third.

A free trade agreement with the EU will exacerbate Canada’s existing large bilateral deficit, at the expense of output and employment in many important sectors of the economy. 

This risk is amplified by special rules created by politicians that encourage banks to lend freely to governments.

In the case of Greece, government actions and regulations also lie at the heart of what threatens to be a European financial crisis.

Here’s how it works. Governments require banks to hold capital against the loans that they make, anticipating that in the normal course of business, some of the loans will not be repaid.  The riskier the loan, the more capital that needs to be held in reserve. However, under international rules negotiated by government representatives through the Bank for International Settlements (BIS), government loans fit into a special category that has a 0% risk requirement.  That means European banks do not have to hold any reserves against loans they make to European governments.  That’s right, politicians implicitly promised banks that governments would never default.  And, given the opportunity to make “risk free” loans that require no capital commitment, bankers purchased mountains of government debt.